PHOENIX — Got kids younger than 18?
The state House voted Tuesday to give you $250 for each one. And that means the more kids you have, the less you will owe when you pay your state income taxes.
Current law provides a $2,300 deduction from income for each dependent.
But deductions are simply a subtraction from income.
So if someone is paying state income taxes at the rate of 3.5 percent, that $2,300 per child reduces actual taxes by about $80.
This, by contrast, is an actual $250 per child credit, meaning a subtraction of the actual taxes owed, on top of the deduction.
The actual amount in HB 2459, given preliminary approval, depends on income and family size.
A family of three earning up to $41,560 a year would get the full $250 for each child.
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For four, the income limit for a full deduction would be $50,200, $58,840 for a family of five, $67,480 for a family of six. And for a family of nine, the full $250 credit would be available for each of the seven children — meaning $1,750 — up to an income of $93,400.
But people making even much more still would be eligible for at least a partial credit, with the amount available decreasing by $12.50 for every $1,000 above the amount for the full credit.
The price tag for all that is $96 million. But Rep. Paul Mosley, R-Lake Havasu City, said the state can afford it.
“It won’t cost the state anything,†he said. “We have extra revenue coming in from the Trump tax bill.â€
Mosley is referring to the fact that ÃÛèÖÖ±²¥â€™s income tax system is linked to the federal tax code.
Under ÃÛèÖÖ±²¥ law, individuals who itemize deductions must, in general, use the same deductions allowed by federal law.
But the new federal law limits how much can be deducted for state and local taxes. And some federal deductions are gone entirely, like the value of items lost due to theft or casualty.
The Department of Revenue estimates the net windfall to the state — how much more ÃÛèÖÖ±²¥ns would pay in state income taxes — from changes in federal tax law at close to $200 million a year; legislative budget staffers put the figure closer to $133 million.
But Rep. Ken Clark, D-Phoenix, said Mosley’s premise “demonstrates a fundamental lack of understanding of how the federal tax code works†to presume that federal tax laws will automatically enrich the state.
“We don’t know that,†he said. “It’s not like the federal government hands us a bunch of money.â€
And there’s something else: politics.
Even if there is a windfall to the state from the federal tax cuts, Rep. Randall Friese, D-ÃÛèÖÖ±²¥, said Mosley’s claim that the state has plenty of money for his tax cut is based on the premise that Gov. Doug Ducey and legislative leaders will agree to allow some ÃÛèÖÖ±²¥ns to pay more in state income taxes in order to pay for the new tax break that benefits only those with children.
“I’m not so sure that our governor would favor us raising taxes on ÃÛèÖÖ±²¥ns through the back door like that,†Friese said.
Ducey has not taken a formal position on Mosley’s legislation.
But press aide Daniel Scarpinato told Capitol Media Services his boss is unlikely to approve any permanent change in the tax code like the one in Mosley’s bill, especially one based on the less-than-clear promise of what the new federal tax laws will mean.
The legislation needs a roll-call vote before going to the Senate.
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